After the Rent Strike: Neoliberalism and Co-op City

By Annemarie Sammartino

In mid-1976, a provisional settlement awarded control of Co-op City to its residents. Co-op City was, and is, a 15,382 apartment middle-income development located in the Northeast Bronx. The achievement of resident control represented the culmination of negotiations following a thirteen-month rent strike that destroyed the non-profit United Housing Foundation (UHF) that had built Co-op City and nearly bankrupted the New York State Housing Finance Agency. As the terms of the provisional settlement began to come out, the Wall Street Journal was apoplectic about what awarding resident control might mean:

If the state wants to regain its financial credibility, it will have, to put it brutally, to make an example of the Co-op City rent strikers… The state may find… that the rent strike will collapse after the first tenants lose their apartments. But in any case, it will be more humane to throw people out into the June sunshine than into the December snow.[1]

This vision of a state devoid of power and a citizenry run amok that struck terror in the heart of landlords and the Wall Street Journal was celebrated by others. Vivian Gornick introduced the drama of the rent strike to readers of the Village Voice by writing “What is happening in Co-op City is what happens when the resigned become resistant, the scattered become organized, the meek become militant. And that — whatever your political sympathies — is a human spectacle on the grand scale.”[2] In a rare moment of agreement, the Village Voice and the Wall Street Journal shared the sense that Co-op City’s rent strike victory and the achievement of tenant control was the first step in a new political order in New York.

They were wrong.

As Co-op City’s cooperators would soon find, the achievement of cooperator control was a pyrrhic victory. The financial bind that Co-op City found itself in — and that had led to the rent strike — had not gone away. The only difference was that now the cooperators were in charge of finding a solution. Desperate to stabilize their own credit situation, neither the City nor the State was in any mood or position to offer relief to strapped tenants of a “troubled” housing development. And as the scope of Co-op City’s construction defects continued to emerge in the years after the rent strike settlement was announced, the size of the development’s financial obligations and its economic troubles would mount.

To understand why debt would be such a millstone around the necks of Co-op City’s residents, it is important to explain briefly what Co-op City was. After all, while Co-op City’s rent strike of 1975-76 was the largest rent strike in American history, it was not actually a rent strike. Rather, Co-op City’s over 50,000 residents were technically cooperators, or co-owners of the development. Rather than rent, residents paid “carrying charges” that covered their mortgage, utilities and maintenance charges. As the name “Co-op City” was meant to imply, it was the size of a city, the largest cooperative development built by the UHF — a cooperative housing organization that was financed by the New York Mitchell-Lama law that offered developers tax abatements and low-interest-rate mortgages in exchange for the promise to provide affordable housing. Due to a combination of factors including inflation, rising interest rates, and most likely corruption, Co-op City officially ended its construction period in December 1972 with a mortgage of $390 billion, over one and a half times the size of the originally planned mortgage amount of $250 billion.[3] This had led to a series of carrying charge increases that meant that by 1975, Co-op City residents faced costs that were approximately twice what had been promised when the development was first proposed a decade earlier. It was this inexorable carrying charge increase that led to the rent strike.

Much of Co-op City’s leverage during the rent strike came from the size of this mortgage — Co-op City was (to use today’s language) too big to fail. However, when Co-op City’s residents assumed control of the development, they also agreed to assume control of its debt and, although they didn’t realize this at first, their negotiating position was now considerably worse.

At first, all sides, but especially Co-op City’s resident Steering Committee (SCIII), were optimistic about their ability to manage the cooperative and pay down debt better than the UHF. The SCIII recognized that their first task was to put Co-op City’s finances on a solid footing. SCIII repeatedly referred to the corruption, mismanagement and waste in Co-op City and other UHF developments. In a 1977 interview, the cooperator leader Charles Rosen explained: “Did you ever meet any of those dopes that run big corporations? The only difference between them and us is that they got a chance to do it and we didn’t.”[4] Rosen commissioned tenants from a variety of backgrounds to do the work of managing the development. A retired engineer looked over the plans for the power plant, a bus driver with no engineering or building management experience, took over the problem of the broken laundry machines in building basements.[5]

New York State was equally hopeful that new management and a new approach could solve Co-op City’s financial woes. Governor Carey appointed the developer Richard Ravitch to make recommendations regarding Co-op City in particular as well as the entire Mitchell Lama Program.[6] Ravitch’s report was one in a series of reports released by the state and the city on the troubled Mitchell Lama program. Ravitch considered whether cost-cutting or commercial leases might help turn around Co-op City’s finances but quickly concluded that "because of the size of Co-op City, a $1,000,000 savings in expenses or increase in non-residential revenues translates into only a $.14 per room per month reduction of the burden that much be met from residential rentals if financial self-sufficiency is to be achieved."[7] Needless to say, a new laundry room contract or the assistance of retired engineers in restarting the HVAC plant would not be enough.

Once it became clear that the financial solvency of Co-op City could not be achieved by cutting costs, commercial leases or a plan to more fully utilize the power plant, the interests of cooperators and the state diverged. After all, Co-op City’s leadership wanted to save money in order to make the development affordable for residents, but as Ravitch explained, the State needed to view Co-op City “from its vantage point as a mortgage banker.”[8] He proposed a schema in which existing residents would not be displaced, but the rent would be raised to match 25% of their income. Meanwhile, new residents would only be allowed to move in if they could pay a so-called “economic rent,” an amount sufficient to return Co-op City to solvency. In other words, the Ravitch plan would have abandoned the original Mitchell-Lama mission of providing affordable housing to the working and middle class to one that was only open to those with enough means to afford an “economic rent” for a heavily indebted project. This plan was never enacted (in part due to its complexity and difficulty of implementation), but it was seen by Carey and others as a solution to Mitchell-Lama’s woes well into the 1980s.

Both the inconsistencies of Ravitch’s plan and its popularity in Albany can be explained by a fundamental difference between the goal of the Mitchell-Lama Program and the reality of the financial situation the program found itself in the 1970s. When Mitchell-Lama had been designed in 1955, it operated as a subsidy to developers. By the mid-1970s, it had become clear that Mitchell-Lama was not financially viable without ongoing subsidies beyond the construction period. It was also clear that neither the State nor the City was willing to offer them.

Underlying this refusal to subsidize Mitchell-Lama was a shift in how the city and state viewed debt. For years, even as its economic fortunes dimmed and national monies disappeared, New York had maintained its unique array of social programs — including its own Mitchell-Lama developments — through an ever increasing debt burden. Suddenly, in 1975, New York’s creditors stopped seeing it as a good investment and the city nearly descended into bankruptcy that fall. In the aftermath of this crisis, New York City was in a kind of receivership for the rest of the 1970s. Less heralded but equally influential, the state-sponsored Urban Development Corporation had nearly collapsed in 1975, only becoming solvent when it secured a bailout and reoriented towards “economic development” and away from the provision of housing as such.[9]

In the aftermath of the near collapse of the UDC, the HFA and the City of New York, state officials now viewed debt as their morbid enemy. Indeed, referring to the city’s indebtedness, Republican State Senator Roy Goodman referred to New York as “a sick patient with a rapidly spreading form of financial cancer.”[10] For Goodman and others, New York’s compassion towards the poor and middle class not only caused the very pathology it sought to cure but also this fiscal irresponsibility was the cause of New York’s financial plight. These views inspired a “new urban paradigm.”[11] “In Place of the Great Society there would be welfare reform, privatization of city government, stringent fiscal policy, establishment of charter schools, opposition to civil servant unions” and more draconian police policies.[12] Needless to say, Co-op City — a government financed mass housing development largely occupied by union members — fit awkwardly in this social vision.

Many observers expressed dismay at the failure of Co-op City’s residents to recognize reality and take financial responsibility for the development they had fought so hard to control. The Executive Director of the Citizen’s Housing and Planning Council explained that “The issue, as we see it, is that Mitchell-Lama projects have to carry their own weight… as managers they must live up to the responsibility for assuring the building produces sufficient income to pay costs. That is the issue at Co-op City.”[13] In a letter to Co-op City’s state assemblyman, Governor Carey expressed his exasperation that Co-op City’s residents were “naïve and unrealistic” in their belief that the legislature would do anything to help them when “average homeowners” had experienced “relentless” inflation with only limited relief.[14]

Nor was this merely an elite impression; a fear that Co-op City might allow itself to escape financial responsibility motivated many New Yorkers to write to Carey.[15] One such New Yorker wrote to Governor Carey to complain that: “No one said to us forget your problems, like you are now doing at Co-op City… I am dismayed and disheartened by the actions of public officials who are permitting the citizens of New York to ignore and even laugh at their responsibilities.”[16] Another letter writer decried the “triumphant chortling” of the rent strikers, insisting that “the time is long since past when all members of the City community (and State community as well) should realize that ‘the party is over’ and continuation of rip-off of City and State funds must case.”[17]

Ronald Shiffman, a housing expert and professor at the Pratt Institute, was one of the few people to defend no only the abstract principle of affordable housing but also to propose a plan for its financial stability. Shiffman was part of a task force on Mitchell-Lama housing convened by Carey as part of the rent strike settlement. While the task force’s recommendations largely focused on Ravitch’s recommendations for the application of an economic rent model to Mitchell Lama housing, Shiffman instead offered an impassioned defense of Mitchell-Lama’s original vision. He objected to the emphasis on solvency and debt, protesting that it ignored “social considerations “—namely the welfare of Co-op City residents and those of other Mitchell Lama developments. Instead, Shiffman argued for a more comprehensive plan to return Mitchell-Lama to its original plan of providing housing to people of moderate means. The centerpiece of this plan was a mortgage stabilization program that would rely upon either a longer mortgage term or federal financing to reduce mortgage payments to an amount that would keep carrying costs in a range that would allow it to serve the middle class.[18]Yet because Shiffman’s plan involved either an expansion of debt financing or a reliance on an unsympathetic federal government, it was a non-starter.

Indeed, even within Co-op City, few in the leadership defended or explained the importance of cooperative ownership as an alternative to the single-family home or even the value of affordable housing for “moderate income New York taxpayers” in any form. The rhetoric of responsibility was irresistible. In letter after letter to the governor or other outside organizations, Co-op City residents and their leadership emphasized the fact that they had been deceived, but rarely discussed the idea that either affordable housing was necessary for the city, or the idea that cooperative housing offered an important alternative to individual mortgages.

By stressing the perfidious behavior of the state and the UHF, Co-op City’s leadership begged for the state to take into consideration the fact that Co-op City’s costs included factors that were beyond their control and that had been misrepresented to them. “How many of these cooperators would have signed up if the real cost was made known to them?”[19] The argument then became about how truly unique or deserving Co-op City residents were rather than a referendum on the importance of affordable housing in an unequal city or the value of alternative models of providing that housing. Moreover, whether this was intended or not, the rhetoric of deception and fraud divided the tenants into two groups — those who moved in during the initial occupancy period and had not known what they had gotten themselves into, and those who arrived later, who had only themselves to blame for choosing to live in a “troubled” development. It should also be mentioned that the split between first occupants and later arrivals mapped, albeit not perfectly, onto a racial divide between whites and others.

Although the residents of Co-op City were bitter opponents of the State and others who insisted that they pay an “economic rent,” in some ways, their logic was not so different after all. On each side of the divide, economics and morality were deeply connected. Co-op City’s critics argued that they had a moral responsibility to discharge their financial obligations. Co-op City’s residents argued that they had been lied to and on that account were due economic recompense. Even Co-op City’s most vociferous defenders did not deny that a mortgage was a binding obligation, merely that the perfidy of the UHF and the lax oversight of the state meant that in this case — and this case only — it should not hold. An identification of moral responsibility and austerity politics was both inescapable in these years and would come to have fateful consequences for the future of affordable housing in a city that today is even more out of reach for ordinary New Yorkers.

Annemarie Sammartino is Associate Professor of History at Oberlin College. She is currently completing Freedomland: Co-op City and the Story of New York, 1965-1990.

[3] State Comptroller, “New York State Audit Report #7: New York State Mitchell-Lama Program—Supervision of Development Costs of Co-op City by the Division of Housing and Community Renewal,” Audit Report NY-AUTH-18-78, December 29, 1978, 1.

[4] Betsy Brown, “Who is Charlie Rosen and Why does he Think he Can Run Co-op City?” Sunday News Magazine, May 29, 1977, 5.